Strategic Analysis of Paper Manufacturing Industry

This strategic analysis covers the five forces that can affect the paper manufacturing industry's profitability, including the threat of new entrants, bargaining power of suppliers and buyers, threats of substitute products, and rivalry among existing competitors. It also discusses the industry's opportunities and threats, such as the availability of raw materials and the increasing innovation in information technology.

Running head: STRATEGIC ANALYSIS
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Industry analysis
According to Michael Porter, there are five forces that can affect the industry or a firm’s
profitability. This analysis will cover these five forces and how they can affect the paper
manufacturing industry? (porter, 2008)
These forces include:
1. The threat of new entrants
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. The threat from substitute products
5. Rivalry among the existing players (porter, 2008)
The threat of new entrants
Many are the cases whereby new entrants in paper manufacturing industry tends to bring
in inventions and innovation due to an unused business opportunity they have noticed in the
industry. The innovation tends to reduce the cost of production and all other related products,
therefore the initial firms in this industry will be forced to lower their materials to be at purr with
these new entrants selling at a cheaper cost thus reducing profitability.
Bargaining power of suppliers
The overall impact of supplier bargaining power adversely lowers the profitability of
paper and packaging industry. This is since almost all companies within the paper industry make
their raw material purchase form many different suppliers. Powerful suppliers in Consumer

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Goods sector use their negotiating power to extract higher prices from the firms in paper and
packaging industry.
Bargaining power of buyers
It’s the nature of buyers to always want the best and quality product at the minimum price
possible. This an impacting pressure to the paper industry in the long run in that, because they
aim at making sales , they consider increasing the number of customers, by offering cheaper
prices and offers whereby in the long run they make more sells but relatively cheaper profits
compared to when there is small buyer bargaining power. (porter, 2008)
Threats of substitute products
Paper industry always suffers when they face a competition from a product meeting
similar customer needs like they have been providing. For instance invention of the computer
has greatly affected the paper industry since there is less of paperwork due to computerized
activities in today’s business worlds and lifestyle too.
Rivalry among existing competitors
An intense rivalry between our paper industry and other existing company will tend to
decrease the level of profits this industry generates in short and long run. For instance, the paper
industry and firms within this industry operate in a very competitive environment with the
packaging industry. Generally, competition will always affect profitability in the long run if not
handled.

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Industry opportunities
1. Availability of large forest and tree plantations around the world that offer relatively
readily available raw materials for the paper industry
2. Ready market and promising non-ending use of paper products
Industry threats
1. Increasing invention and innovation in the field of information technology sweeping
away the use of this industry products like papers
2. Presence of Unfavorable laws which limit the paper industry activities. In many cases are
environmentally unfriendly activities.
3. Threats of substitute products
4. Increasing innovation leading to the high use of technology (Harren , 2006)
Industry conclusion
Paper industry is one of the largest industries in the business field. This is because of
many firms in this industry although they seem to share raw materials they produce different
products like papers and fibers. It widely segmented and thus provides a wide range of products.
Due to this reason, the competition in this industry is very high and therefore entrance and exit in
this industry are open. The raw material for this industry remains pulp and trees and therefore
increasing the level completion. To achieve the maximum profits when in this business, it’s very
important that the individual firms in this industry employ the porter five forces discussed above
and pest analysis.

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References
Harren , D. N. (2006). A study of challenges and threats faced by the global paper industry. research
space, 12.
porter, m. E. (2008). The five competitive forces that shape strategy. Harvard business review, 25-40.